Expert FAQ: Temporary Workers – Are Temps the New Norm?

As the U.S. economy contracts for the first time since the recession of 2008-2009, the phrase “job permanence” seems to be an echo of the past. In the context of a generally lackluster U.S. economy with weak job creation and slow recovery, we are seeing the growth of a certain type of worker: the temp.

NerdWallet decided to interview Professor Hatton from the Department of Sociology at the University at Buffalo and the author of The Temp Economy: From Kelly Girls to Permatemps in Postwar America, to learn the effects that this new industry could have on the overall U.S. economy. In addition, NerdWallet spoke with Professor Houseman, a labor economist at W.E. Upjohn Institute, to ask whether there are signs that the temp worker has potential to replace full-time employees.

Job Growth Doesn’t Tell The Whole Story

Amidst murmurs of the “R” word once again, economists are urging people to try and understand that the situation may not be as dour as last fall’s 0.1% contraction suggests. Many unprecedented factors contributed to the loss, such as Hurricane Sandy and the Fiscal Cliff.

Despite the losses, jobs and consumer spending are up. Over the past six months, payroll employment increased by about 160,000 jobs per month. According to an ADP National Employment Report, the private sector added 192,000 jobs from December 2012 to January 2013. Jobs in professional/business services, trade/transportation/utilities, construction and financial activities all gained a combined 100,000 jobs while manufacturing lost 3,000 jobs.

These gains only represent a fraction of the U.S. workforce. Economists can throw around gimmicky buzzwords like “growth” and “job creation,” but what type of jobs are being created?

The Rising Temp Economy: By the Numbers

In her recent New York Times opinion column, Professor Hatton explains that in the years after WWII, the American workforce had won major improvements in worker’s compensation, pensions and health benefits for full-time employees that went beyond the scope of unions to nonunion employers. As an alternative to full-time employees, companies like Russell Kelly Office Service and Manpower Inc. launched a new category of workers marketed as fashionable women working part-time as an economic necessity to the war effort. The main appeal to these workers was that they were exempt from benefits otherwise entitled to full-time employees.

Eventually, temp agencies learned to exploit the fact that their workers were exempt from worker’s protections like health benefits and pensions, and undermined the labor unions by establishing a “new sector of low-wage, unreliable work.” As the glossy marketing by the Kelly and Manpower companies waned, the idea of a constantly rotating workforce caught on and companies continued using temporary workers in times where they wanted to cut employee costs. Temp workers were not subject to the luxuries of raises, sick leave, unemployment taxes or fringe benefits.

In 1980 temporary employment rose from 185,000 to 400,000 temps a day and by 2000 it continued growing to nearly 3 million.

This ushered the start of a lasting permanence to temporary work becoming a sustainable economic option. Temp jobs are still jobs, after all.

Pros for Workers

Temporary work doesn’t have to be beneficial to just employers. Those looking for work during the economic downturn need to realize that temp work can be a good idea in areas where work is scarce for the following reasons:

Temping increases your chances of getting a job.

Temping helps you expand your network.

Temping helps you gain experience.

Temping offers variety and lets you sample different roles.

Temping often offers free training and experience.

Temping usually allows for flexible, part-time hours.

Temping offers the possibility to climb the wage ladder and gain full-time employment.

Those out of work or struggling to make ends meet may consider calling a temp agency to relieve their economic situations. Many find that temp agencies are an excellent source of income and often contribute to valuable experiences needed to land full-time employment.

The pros and cons of a temp-heavy economy are loaded on both sides, but in the current economic climate, the fact remains: temps are here to stay.

Ask the Expert: Lasting Effects of a Temp Economy

When we spoke with Professor Hatton, from the Department of Sociology at the University at Buffalo, we asked what effects this industry will have on the overall economy:

“In terms of effect on the economy, it may be okay, but a shift [to temp workers] can be destructive to full-time workers. Inasmuch as workers are also consumers, such a shift may very well be destructive to the economy as well.

The use of temporary work is a growing trend that we see everywhere, not just in the temp work industry. There’s a growing trend towards outsourcing, part-time workers, independent contractors and they are all different manifestation of the same ideology. There’s a worker exploitation inherent in these trends where one can pay such workers less in wages and benefits but use them the same as permanent employees.”

Next, we asked Dr. Houseman from W.E. Upjohn Institute, whether the rise in the temp industry means that the temp worker has potential to become a substitute for the full-time employee:

“We don’t know yet that this [substitution towards temp help] is actually happening in our economy. There isn’t enough government data to suggest this. Employment in the temporary help industry is still somewhat below its pre-recession level, and we may need to wait another year or two to see if it bumps up above its last high.

The recession had a huge impact on the temp-agency industry – during the recession temp help employment dropped by more than 30%. During the recovery, job gains have been relatively greater in the temp help industry than in the economy overall. But that is expected — the temp help industry lost a lot more during the recession.”

Finally we asked Dr. Houseman what other rationale employers might have for choosing to hire temporary workers:

“The economy is weak and there’s a lot of downward pressure on compensation. But it’s hard for employers to go in and say to workers that they need to cut their wages or raise their insurance premiums. That can lead to severe employee morale issues. Instead, employers sometimes hire temporary or other types of contract workers at lower costs, and so effectively create a two-tiered wage system. It becomes a mechanism for reducing average wage and benefits costs. On top of that, the Affordable Care Act may lead employers to increase their use of temporary and part-time employment to circumvent this mandate. For more information I have also published a paper on this matter called Manufacturer’s Outsourcing to Staffing Services.”

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